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How to guarantee an input tax claim on local flights

by , 16 August 2013
Very few people know which portions of their air travel costs carry Vat charges. Those who do, know they can claim as input tax on some of the costs. Don't forfeit your input tax claims because of ignorance! Read on to discover an effective way to guarantee your input tax claim of local flights and can get extra cash back in your business's pocket.

According to the Practical Vat Loose Leaf Service,all flights that begin and end within South African borders are subject to Vat at the standard rate of 14%. Also subject to Vat is:

  • Airport tax (which is actually a passenger service charge payable to the Airports Company South Africa (ACSA – Vat registration number 4930138393)); and
  • Any charge by a travel agent on local flights.

And that means you can claim tax back on this…

Here's an example of how you can claim input tax on costs attached to local flights.

Let's say Glen buys a return ticket from OR Tambo (Johannesburg) to Cape Town on Kahlua Airlines. He buys the ticket through his travel agent, who gives him a tax invoice for R1 824.

The Vat isn't shown separately, but the tax invoice states that 'Vat is included at 14%'. The invoice also shows the Vat registration number of Friendly Travel Agent CC.

Being an accountant, Glen asks the travel agent for a breakdown of the charges. They're as follows:

  • Kahlua Airlines - R1 710
  • Airport tax – R114

Glen then asks the travel agent how he can claim input tax without tax invoices from the airline and ACSA.

The answer is simple: The Vat Act allows the travel agent, provided he' is a vendor, to issue his tax invoice including charges (plus Vat) on supplies made by other vendors. So becauset Glen has a valid tax invoice, he can claim input tax in his business. But to do this, he must keep the travel agent's tax invoice for five years.

Basically, the travel agent doesn't declare output tax on the supplies made by his principles (Kahlua and ACSA), but they exchange information with him by means of a monthly statement so that they can declare the right amount of output tax.

Here's what you must remember about claiming tax on local flights:

If Glen booked his flight online, he'd get an e-ticket from Kahlua Airlines showing not only his airfare, but ACSA's passenger service charge as well. His ticket would cost R1 824, including Vat of R224, which he can claim as input tax, provided it was a business trip. He must keep a copy of his e-ticket for five years.

Should Glen have to pay a penalty fee because he changes his flights, the penalty will also be subject to Vat at the standard rate and he'll get a tax invoice for it.

Use this checklist to guarantee your input tax claim on local flights

  • Ensure that a valid tax invoice is issued by your travel agent.
  • The tax invoice must indicate that it' is Vat inclusive and must show the travel agent's Vat registration number.
  • The flight must begin and end in South Africa.
  • Claim the Vat charged on the travel agent's fee, the ticket price and any penalties you may incur.

Just remember, you can't claim input tax on shuttle ortaxi fees to and from the airport as these are Vatexempt.

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